Friday, July 14, 2017

Real retail sales concerning while industrial production shines

Real retail sales is one of my favorite data series, because it tells us so much about the consumer economy. This morning's report was no exception.

To begin with, the unusual early decline in gas prices brought down CPI to unchanged. On a YoY basis, CPI is now only up 1.7%:

This is a backdoor positive for real wages. with nominal growth in the 2.3%-2.5% range, the decline in inflation means more spending power for consumers.

But since nominal retail sales declined -0.2%, this means that real retail sales declined as well:

Next, real retail sales per capita is a medium to long leading indicator, and here the story is, a plateau since last December:

This indicator has to be rated as no better than a neutral as of now. That is clearer when we look YoY:

While we've had pauses in real retail sales growth before in this expansion, this time the pause coincides with the weakening or turning outright negative of several other of the long leading indicators. It wouldn't take much more weakening of this metric to turn it, too, into a negative.

If retail sales were poor, at least the Doomer mantra that "hard" data hasn't confirmed "soft" data will be a little more quiet today, as industrial production rose +0.4%, and the manufacturing component rose +0.2%:

Bottom line: mixed news for the nowcast, with a little more cause for concern in the long term forecast.